From November 2019, freelance solicitors will be able to deliver legal services direct to the public. Pearl Moses takes a look at the key facts.
Current solicitor regulation
Under the current Practice Framework Rules 2011 , solicitors can only practice in one or more ways listed in Rule 1.1 PFR:
- as a registered sole practitioner
- as an employee of either an authorised law firm or a non-SRA authorised organisation (for example, a firm authorised by another regulatory body)
- as an in-house lawyer
What are the SRA reforms around practice?
In their new Standards and Regulations , the SRA are proposing two separate codes of conduct (one for firms and one for individuals).
These will allow solicitors to carry out non-reserved legal work from an unauthorised business as well as providing services on a freelance basis.
What distinguishes freelance work?
Freelancers will be self-employed, practise in their own name, and be engaged directly by their clients.
Freelancers will not be permitted to employ any staff if they are providing reserved legal services to the public but there will be no such restriction if they are providing non-reserved legal services.
A practice that consists of non-reserved work means support staff and fee earners can be employed.
Are there other limitations on freelance practice?
Yes. The SRA are removing the current three-year rule regarding supervision (r 12 of the current Practice Framework Rules), whereby solicitors are prevented from setting up on their own until they have acquired a minimum of experience.
Under the new rules, a freelance solicitor who has been qualified for more than three years will be able to provide reserved legal services to the public but those who are qualified for less than three years will only be allowed to provide non-reserved activities.
Freelance solicitors will be restricted from holding client money.
This will exclude freelancers from holding transactional client funds (for example the proceeds of sale on conveyancing, court fees or the stamp duty payable on a house purchase).
What about professional indemnity insurance?
This is the crux of the matter and the reason why the proposals were strongly opposed during the consultation process by the Law Society and the Legal Services Consumer Panel.
Solicitors will no longer share a level playing field with a minimum standard of PII – a regulated firm must have professional indemnity insurance equivalent to the SRA’s Minimum Terms and Conditions, but the freelance solicitor will not need to purchase insurance to the same level.
Freelancers offering reserved services will be required to hold “adequate and appropriate” insurance.
The SRA has not yet provided any guidance on what is meant by this but the Law Society is pushing for clarification.
Freelancers who are only doing non-reserved work are under no regulatory obligation to purchase PII, although they would be wise to ensure that they have client protections in place.
What does all this mean for the client?
Different models of practice are likely to confuse many clients who will be unaware of the insurance cover their solicitor will have and may not understand the protections that are (or are not) available to them.
Freelance solicitors will have to communicate to clients up front about insurance arrangements and to explain the circumstances in which they may be barred from making claims against the Compensation Fund if there is a problem with their legal matter.
What can regulated firms do to prepare?
If you’re in a regulated firm you could adopt the SRA’s Digital Badge on your website.
Displaying the badge can bring benefits especially when competing with unregulated businesses for work.
Freelance solicitors doing reserved work will also appear on the SRA digital register, but there is no such requirement for freelance solicitors doing non-reserved work.
Where a freelance solicitor might be able to offer lower prices due to lower regulatory overheads, they can’t offer the same protections as those afforded by a regulated firm.
What if I want to set up as a freelance solicitor?
Make sure you understand the benefits and pitfalls and make sure you look carefully at the SRA guidance around this issue (when published).
If you are currently working as a sole practitioner, you should be aware that you would need to close your practice before you could begin working as a freelance solicitor.
This would also require that you purchase six years of mandatory run-off cover. Our most recent PII survey suggests that the average cost of run-off cover for a sole practice is around £21,600.
When will the changes happen?
The changes will be introduced on the 25 November 2019 as part of the SRA’s new version of the SRA Standards and Regulations.
How we can help
Over the summer and into the autumn, we will be supplying a range of materials to help you prepare including:
- seminars and road shows around the country
- new and revised practice notes
- blogs and magazines
- webinar recording and e-learning
In the interim, we have a series of free podcasts planned on this topic starting with myself and Paul Bennett discussing ‘So you Want to be a Freelance Solicitor’ (available 5 July).